ECON MIDTERM 1

Which of these would you expect to have relatively high price elasticity of demand?

name-brand cereals

Jason purchased a new printer for $150, although he was willing to pay $175. The minimum price acceptable to the seller, Jasmine, was $145. The results of this transaction are a consumer surplus of

$25 and a producer surplus of $5

Suppose the actual price for good A is $20. John is willing to pay $30, Susie is willing to pay $28, Joseph is willing to pay $25, Jessica is willing to pay $23, and Jeremy is willing to pay $21. What is total consumer surplus?

$27

Which of these indicates a possible income elasticity measure for a normal good?

0.8

A unitary elastic demand means that if the percentage change in price is _____, then the percentage change in quantity demanded is _____.

5%, 5%

Which statement about economics is CORRECT?

Economists consider how rational people respond to incentives

Which statement is a characteristic of economic models?

Models try to boil down an economic situation to its most basic elements.

If bagels and doughnuts are substitute goods, then which scenario is likely to occur if the price of bagels is reduced?

The demand curve for doughnuts will shift to the left.

Marginal analysis would put an emphasis on _____ costs and benefits.

additional

The more elastic supply is for a given demand curve, the greater the tax burden on _____ and the _____ the deadweight loss will be.

buyers; smaller

Which of the following words BEST describes what economics is about?

choices

In the market for cable television, fewer people are subscribing to cable while the cost of providing cable television has increased. As a result, since the drop in cable subscribers has had a bigger impact on the market, we can expect a(n)

decrease in the equilibrium price and quantity of cable television.

Which scenario is the MOST likely effect of a decrease in the price of tablet computers on the market for laptop computers (a substitute)?

decreased equilibrium price and decreased equilibrium quantity

Which of these circumstances would NOT affect the supply of new cars?

higher interest rates for new car financing

Economists understand that people respond to

incentives

(Figure: Demand for Shoes) A shift to the right of the demand curve could be caused by a(n)

increase in income if the good is a normal good.

Ceteris paribus, a decrease in the number of businesses selling pizza will cause a(n)

increase in the equilibrium price of pizza.

An excise tax of $2 is placed on a jar of honey. Honey producers end up bearing only $0.40 of the tax. The demand curve for honey is

inelastic

What would be a possible opportunity cost of a person going to a doctor for a check-up?

lost income due to not being at work for those hours

If there is a lack of competition in a market, a market failure results because the quantity of goods sold is _____ than the optimal level while prices are _____ than the optimal level.

lower; higher

Ceteris paribus means

other things being equal

Questions that involve the understanding of basic facts are _____ questions.

positive

The market economy is often called the price system because

prices provide information for both buyers and sellers

Increasing prices _____ total revenue for a product with inelastic demand and _____ total revenue for a product with elastic demand.

raises; lowers

The maximum amount of a product that sellers are willing and able to provide for sale over a particular period at various prices, ceteris paribus, is called

supply

If television sellers expect the prices of televisions to fall in the future, then today, we are likely to see the

supply of television increase

A shift in the demand curve is NOT caused by

technological advances in manufacturing

Sujata has a stopover in Iceland and can choose one of three tours: visit the thermal springs, hike the glaciers, or view the Northern Lights. If Sujata chooses the Northern Lights, her opportunity cost would be

the value of visiting the thermal springs if that was her second choice after the Northern Lights.

A good is said to be highly inelastic if

there is a small change in quantity with a change in price

If a store sells a good that has inelastic demand, what would be the net result on its total revenue from an increase in price of that good?

there would be an increase in total revenue

opportunity cost exists because

using resources for one activity means that their use elsewhere must be given up.

How large is deadweight loss in equilibrium and there are no market failures?

zero